Colombian Dairy Industry Faces Pressure Amid Trade Agreement Provisions
As is customary in Colombia, the early days of the year mark the arrival of imported milk, primarily from the United States, facilitated by the FTA between the two nations. Historically, 40% of the import quota would be exhausted on January 1. This year, however, by January 7, only 457 tons—equivalent to 2.4% of the tariff-free quota—had been imported. For 2025, the quota stands at 18,987 tons, after which a 2.2% tariff will be applied.
For powdered milk from the European Union, the tariff-free quota is set at 8,800 tons, with an extra-quota tariff of 18.4%. Additionally, under the Andean Community (CAN) trade agreement, around 7,000 tons of powdered milk are being imported from Bolivia, a country with only one-third of Colombia’s cattle herd but clear agro-industrial policies to boost exports.
Slow Import Pace Amid Sanctions
According to Óscar Cubillos, head of planning and economic studies at Fedegán-FNG, the slow pace of milk imports from the U.S. is due to a partial sanction imposed by the Ministry of Commerce. This sanction, in effect until January 16, 2025, includes an extra 4.86% tariff, introduced last September as part of an investigation into U.S. government subsidies to its dairy producers.
Cubillos explained in his column for CONtexto Ganadero that many importers are waiting for this sanction to lapse before resuming imports, as current inventories—comprising whole milk powder, skimmed milk powder, and UHT liquid milk—totaled around 21,000 tons at the start of December 2024. These stocks provide enough supply to hold off on additional imports until mid-January.
Market Dynamics and Domestic Production
Cubillos highlighted the paradox of continued imports despite the steady pace of domestic milk production, which has persisted despite occasional climate-related challenges. The primary reason, he argued, is that increased supply gives processing companies greater leverage to negotiate lower prices with dairy farmers.
Looking ahead, Cubillos noted that starting January 1, 2026, the import quota for powdered milk from the U.S. will be eliminated, ushering in a free trade environment where all imports from the U.S. will be tariff-free. The same will apply to powdered milk from the EU beginning January 1, 2028.
Calls for Renegotiation of the FTA
The government of President Gustavo Petro has repeatedly announced plans to renegotiate the FTA with the United States, both during the campaign and in office. However, no tangible progress has been made to date.
Meanwhile, Cubillos stressed, the dairy sector must contend with what is often perceived as unfair competition, given the apparent subsidies provided by the U.S. and EU to their dairy producers. These subsidies create asymmetries and have serious repercussions for Colombian production, exacerbating the challenges faced by domestic dairy farmers.
